In the late 1990s and early 2000s, many companies began outsourcing contact center operations to far-flung destinations such as India or the Philippines, hoping to cut costs and gain efficiencies of scale. Recently, however, several factors -- growing customer dissatisfaction with the quality of service delivered by some offshore facilities; advancements made in high-quality, low-cost domestic telecommunications systems; the shift to Web-based customer service -- have driven many companies to bring their contact center functions back to the United States.
A recent study by the CFI Group, "Satisfaction with Contact Centers Drives Customer Loyalty," examined Americans' perceptions of and experiences with contact centers. According to the report, customers who believed they had reached a contact center overseas rated their overall satisfaction with the service experience 26 points lower than those who assumed the contact center was U.S.-based. These customers were less likely to recommend the company to others and were almost twice as likely to sever their business relations with that company.
Sheri Teodoru, the author of the study, says location was not the sole driver of negative perceptions of offshore services. "The single biggest issue and biggest source of dissatisfaction is that the first-call resolution -- the ability of the representatives to solve the problem -- was statistically and dramatically worse in outsourced [contact centers]," she says. "It wasn't even a close contest. Clearly there is a language barrier which may hinder the representatives' ability to solve the call, but it's the fact that [customers'] issues aren't getting fixed that's the biggest problem."
Tim Whipple, vice president of virtual contact centers for Palo Alto, Calif.-based contact center technology provider LiveOps, says the service issues come from cultural differences between domestic and overseas locations. "There's a contextual gap," he explains. "When you have someone from another part of the world, there are just certain words and phrases coming out in a different accent. It's not so much the language as it is the context of the colloquialisms of Americans versus anybody else." Michael DeSalles, a Frost & Sullivan strategic analyst, agrees: "The concern I've heard about the most is simply a matter of being understood, not a matter of technical skill."

George Humphrey, director of service line management for Avaya's Global Managed Services Organization, says that while it's extremely common to hear about these challenges, his company is very pleased with the outsourcing services it's had -- and will continue to use -- in India since the late 1990s. "The most important thing to state, because outsourcing is starting to get a bad rap because of language barrier, is that you get what you pay for," he says. "You do have to make it a top priority to ask for references on customer satisfaction statistics to make sure [outsourcing] won't be as much of a problem as we do hear about."
Despite all the negative talk and uncertainty, the outsourcing industry continues to grow -- but with an emphasis on nearshoring and work-at-home agents (WAHAs). According to statistics released by Frost & Sullivan, the outsourcing market earned $20.7 billion in revenues in 2006, and will reach an estimated $27.5 billion in revenue by 2013, by which time the offshore segment is projected to represent only 25 percent to 35 percent of total North American outsourcing revenues.
Companies are moving toward creating a multifaceted outsourcing strategy, in order to have a flexible, expandable workforce that can also accommodate different seasons, promotions, and call values. "They may decide to keep their own in-house contact centers and expand with nearshore facilities like Canada and Latin America," DeSalles explains. "It mitigates [the risk of] having too many agents in a single geographic area, which is extremely risky in case of a natural disaster or pandemic. It also gives organizations an opportunity to benchmark performance."
For those undecided on whether or not to outsource using offshoring, nearshoring, or WAHAs, Teodoru says to use extreme caution before committing to any strategy. "The savings to the bottom line are immediate, and [any potential] loss of the customer is something that erodes over time," she warns. "While the net present value or ROI calculation clearly might suggest that a company is better off in the short or medium term, it is simply a short-term view of the business as opposed to a longer-term view of the customer asset."